Nepali commercial banks have reduced their base interest rate to as low as seven percent citing slow demand for loans amid excessive liquidity with them.
In the past few months, banks have been successively lowering their interest rates. They have reduced the base rates for the month between mid-May and mid-June by 22 percent- point.
As per the information unveiled by 20 commercial banks, they have maintained the base interest rate at a single digit for this month. The average base rate has come down to 8.53 percent. In January, the figure stood as high as 9.69 percent.
The records with Nepal Rastra Bank show that commercial banks are having Rs 955 billion of deposit collection in excess to the lending amount. As of May 20, the commercial banks collected deposits of Rs 5.477 trillion while they provided loans of Rs 4.522 trillion.
A bank’s lending rate is determined by adding a certain premium rate to its base rate. As the base rate declines, the lending interest rate also falls, according to bankers. Based on the nature of lending and risk factors, banks add a premium between 1.5 percent and 5 percent on top of the base rate when they provide loans to their clients.
Of the 20 commercial banks, the base rate of Standard Chartered Bank Nepal is the lowest at 7.01 percent, down from 7.36 percent last month. Likewise, Rastriya Banijya Bank has reduced its base rate to 7.35 percent from 7.42 percent.
Everest Bank has maintained its base rate at 7.48 percent, down from 7.53 percent. Kumari Bank has the highest base rate at 9.63 percent.
Among the state-owned banks, Rastriya Banijya Bank has maintained its base rate at the lowest level. The bank’s base rate is 7.35 percent, a reduction from 7.42 percent.
Likewise, Nepal Bank Limited has lowered its base rate to 7.85 percent from 8.27 percent. Agriculture Development Bank has the highest base rate among these three state-owned banks, at 8.61 percent. Until last month, the figure stood at 8.98 percent.
